PQR Ltd. is a company listed on the National Stock Exchange. The latest audited financial position of PQR Ltd. is as under: Paid up equity Capital: ₹ 780 Crore Free Reserves: ₹ 39,564 Crore Share Premium: ₹ 1,456 Crore T

According to Section 68(1) of the Companies Act, 2013, a company whether public or private, may purchase its own shares or other specified securities (hereinafter referred to as "buy-back") out of: (i) its free reserves; or (ii) the securities premium account; or (iii) the proceeds of any shares or other specified securities. The buy-back shall be authorised by its articles. Quantum of Buy-back (a) Board of directors can approve buy-back upto 10% of the total paid-up equity capital and free reserves of the company and such buyback has to be authorized by the board by means of a resolution passed at the meeting. Free reserve includes share premium also. (b) Shareholders by a special resolution can approve buy-back up to 25% of the total paid-up capital and free reserves of the company. In respect of any financial year, the shareholders can approve by special resolution up to 25% of total equity capital in that year. Debt equity ratio post buy back should not exceed 2:1. Provided that no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. In case the number of shares or other specified securities offered by the shareholders or security holders is more than the total number of shares or securities to be bought back by the company, the acceptance per shareholder shall be on proportionate basis out of the total shares offered for being bought back. In the present case, since the paid-up equity capital, share premium and free reserves is ₹ 41,800 crores as per the latest audited financial statement, the Board can authorise through a resolution passed at its meeting the buyback of shares totaling ₹ 4180 crore, which is less than the ₹ 4204.51 crore which company wants to buyback. Shareholders in their meeting can by special resolution approve buyback up to 25% of Paid up capital and free reserves. So, 25% of 41800 crore i.e. ₹ 10450 crore can be bought back. After the completion of the buyback scheme for ₹ 4204.51 crore, the company's paid up capital and free reserve would drop to ₹ 37,595.49 crore (₹ 41800 crores minus ₹ 4204.51 crore) and total secured and unsecured debts is ₹ 1867 crore. Thus, the debt equity ratio is after by back scheme has been fully completed would be 0.0496, which is less than the stipulated 2:1. Hence, PQR Limited can proceed with the proposed buy back scheme by passing a special resolution passed at the shareholders meeting.